Cable Operators Will Want Mobile Owner's Economics, Eventually

Eventually, U.S. cable operators will want to migrate their mobile subscribers onto owned facilities as much as possible. At low volume, as often is the case, wholesale works. At high volume, owner’s economics tend to emerge. 

The question is how infrastructure ownership happens and when it happens. 

In the near term, such efforts will continue to rely on ways to support “mobile” traffic from the fixed network, using Wi-Fi, but with the likelihood that Citizens Broadband Radio Service will play a bigger role as well. 

source: MoffettNathanson

Should CBRS licenses be acquired, there remains the issue of use cases, which will dictate how infrastructure gets deployed. Logically, any single cable operator will want to use CBRS radios using the hybrid fiber cable network for fronthaul or backhaul, offloading as much traffic as possible to the HFC network, thereby reducing the cost of wholesale capacity purchases. 

Cable operators might logically assume that 95 percent of mobile traffic occurs in and around the local areas where customers live and work. They might reasonably assume that up to 80 percent of traffic happens “indoors” as well. All that plays to indoor Wi-Fi assets and outdoor CBRS assets that could collectively offload most mobile traffic created by their customers.

CBRS is Part of a Shift to Use of Unlicensed and Shared Spectrum

You would be hard pressed to name any part of the internet access ecosystem that will categorically not want to take advantage of Citizens Broadband Radio Service spectrum. Mobile and fixed connectivity providers, wireless internet service providers, indoor connectivity specialists (neutral host), enterprises (private networks) all have use cases.

Device and infrastructure suppliers will gain some new opportunities to support the building and operation of networks. And new apps--many of them vertically oriented to specific industries--also will develop.

With Citizens Broadband Radio Service spectrum auctions planned for June 2020, it also is logical to predict that any would-be users of that spectrum--on either an unlicensed or licensed basis--will start testing use of that 3.5-GHz spectrum now, on an unlicensed basis, to see how well it works.

In instances where unlicensed use works well, even entities that normally prefer licensed spectrum use might consider remaining in that use mode, and bidding for licenses only in locations where congestion is considered likely (more populated areas). 

Entities that routinely rely on unlicensed spectrum, such as wireless internet service providers operating in rural areas are most likely to consider using CBRS in “best effort only” general authorized access mode. 

AT&T has said it plans to use CBRS for fixed wireless internet access services. 

But indoor operations, to support venue coverage, support neutral host indoor access to all mobile operator services, will supply many use cases. Verizon, for example, plans to use CBRS for access in high-traffic areas such as multi-tenant buildings, hospitals, manufacturing plants, stadiums, venues and airports. 

source: RCR

Boingo plans to use CBRS to improve mobile device signal coverage inside terminals at Dalls Love Field Airport. 

Since CBRS was first proposed, exclusion zones that originally were defined statically (there were restrictions near coasts) have been replaced by a dynamic system where it is the over-water areas that are subject to preemption. On-shore use of CBRS is possible nearly everywhere. 

source: FCC, Google Earth, Technicolor

It still seems probable that tier-one connectivity providers will prefer to license CBRS spectrum access rights, as quality of service concerns generally drive them to want control over capacity assets. Other potential users might have more comfort for unlicensed use.

Smaller firms will appreciate the “no cost” use of spectrum, even if QoS is not assured. In many rural markets, contention will not be much of an issue. Indoor uses, even in urban areas, might likewise add value even when “best effort” is the QoS standard. 

The broader issue is the extent to which larger service providers get comfortable with unlicensed access as a complement to licensed assets. 

Though commercial use has shifted from LTE-U to LAA since 2017, use of unlicensed 5-GHz (Wi-Fi) spectrum to supplement licensed mobile frequencies now is something T-Mobile US, AT&T and Sprint are doing.

U.S. Mobile Networks Might Generate 5 to 8 Times More Revenue than Fixed Networks

Mobile networks generate vastly more revenue per home than do fixed networks, as much as five times to eight times more revenue per home. 

There are about 122 million U.S. homes. Assume that Comcast, Verizon, AT&T generate $32 billion in fixed network revenue between them. Assume CenturyLink generates $20 billion annually, about $10 billion from the traditional access business (consumer, small business, enterprise access). So assume fixed network access revenue from those four companies is about $42 billion. 

Assume those four companies pass about 90 percent of U.S. homes, collectively. That suggests revenue per passing for those four firms is about $344 per passing, per year. 

Annual revenue for all mobile service providers in the United States is about $283 billion. Assume 80 percent of those accounts are consumer subscriptions, and can be correlated with homes. That suggests consumer mobile revenue of about $226.4 billion, and a per passing revenue of about $1855. 

That tells you much about the relative value of fixed and mobile networks in the U.S. market. 

Here are some of the assumptions.  

In the fourth quarter of 2019, Comcast Cable generated $14.8 billion in revenue.  Total revenue that quarter was $28.4 billion. 

Verizon’s fixed network business, on the other hand, generated about $7 billion, out of total revenue of nearly $35 billion. 

AT&T had fourth quarter 2019 total revenue of nearly $47 billion. AT&T’s fixed network, plus satellite TV, generated about $18 billion in revenue.  AT&T’s “fixed network plus satellite” operations generate 38 percent of revenue. Perhaps $8 billion or so of that revenue comes from the satellite operations. So the fixed network business might generate $10 billion in revenue. 

Comcast Cable passes 58 million consumer and business locations. Comcast has 26.4 million residential high-speed internet customers, 20.3 million residential video customers and 9.9 million voice accounts, generating average cash flow (EBITDA) of $63 per unit. 

At a high level, the problem is that Verizon’s entire fixed network operation generates about 20 percent of total revenue. AT&T’s fixed network generates perhaps 21 percent of revenue. Comcast, which has a small mobile operation, generates close to $15 billion from the fixed network. 

And that, it seems to me, illustrates the problem. Comcast, AT&T and Verizon all put together generate about $32 billion in fixed network revenue, and revenue is likely to remain flat to negative. 

Verizon homes passed might number 27 million. Comcast has (can actually sell service to ) about 57 million homes passed.

AT&T’s fixed network represents perhaps 62 million U.S. homes passed. 

CenturyLink never reports its homes passed figures, but likely has 20-million or so consumer locations it can market services to. 

Looking only at Comcast, AT&T and Verizon, $32 billion in annual fixed network revenue is generated by networks passing about 146 million U.S. homes. That works out to about $212 per home passed, per year. 

AT&T 5G Innovation Zone Showcases Use Cases

Thes test bed features a private 5G network using millimeter-wave (mmWave) spectrum. LTE and WiFi also are available. Multi-access edge computing connects  on-premises servers to the 5G network.

Will U.S. Service Providers Use Unlicensed CBRS?

It is too early to say for certain how mobile service provider attitudes about licensed spectrum will change as more options are made available for spectrum sharing of licensed and unlicensed spectrum. It seems unlikely that mobile service providers will abandon their historic preference for licensed spectrum. 

Few are likely to consider relying substantially on running their core services on unlicensed spectrum, because that surrenders control over quality of service and congestion control. On the other hand, there is growing reliance on use of unlicensed spectrum as a complement. 

Wi-fi offload provides the clearest example. But spectrum aggregation that essentially bonds unlicensed spectrum to licensed assets is a new tool mobile operators will use. T-Mobile US already uses spectrum sharing on its 4G network, for example. AT&T and Verizon also licensed assisted access versions of such spectrum sharing. 

On the other hand, it clearly makes sense for leading mobile operators in the U.S. market, for example, to experiment with spectrum sharing using the new Citizens Broadband Radio Service, in the months leading up to actual spectrum auctions this summer. 

At the moment, service providers are only allowed to use CBRS spectrum in “best effort” unlicensed mode, but tests will confirm the extent to which the sharing works. That, in turn, could shape appetite for bidding on CBRS priority access licenses. 

To be sure, U.S. mobile operators have higher incentives than do mobile operators in many other countries to look at spectrum sharing. Compared to many other countries, the number of subscribers per megaHertz of bandwidth is significantly higher in the U.S. market. 

source: CTIA

We are at least half a year away from knowing which entities will consider PAL licenses important. By not bidding, we also will know which firms believe CBRS is not a major tool to be used, or that unlicensed CBRS spectrum is adequate for their business purposes.

Can Verizon Gets Where it Wants Using Millimeter Wave?

Spectrum is the foundation of every wireless business opportunity, and Verizon has less spectrum--and less spectrum per customer --han any other major nationwide mobile operator in the U.S. market. 

source: FCC, Cowen and Company

source: Macquarie Capital

Verizon seems to have switched spectrum or capacity strategy following the 2015 AWS-3 spectrum auction, said to be much more costly than Verizon anticipated, at $2.92/MHz/POP. Verizon acquired a huge trove of millimeter spectrum, then launched a fiber deep network upgrade that allows small cells to use that spectrum.

Verizon then declined to bid in recent low-band or mid-band spectrum auctions. 

source: New Street Research

Historically, mobile operators have always faced tradeoffs for increasing capacity. They could acquire new spectrum or shrink cell sizes. Traditionally, cell division has been the way most new usable capacity has been gained, and Verizon--since 2015--has emphasized small cell sizes rather than new spectrum acquisition as the primary means of increasing capacity.

That has been true even as Verizon has migrated spectrum away from 3G to 4G. But some observers believe Verizon will have to return to gaining new spectrum at some point within the next year or so, as its millimeter wave assets--very helpful for dense, urban areas--might be inadequate for capacity supply across wider areas (coverage). 

Dynamic spectrum sharing also will help, as DSS allows 5G handsets and 5G radios to use 4G spectrum. The issue is of course that DSS works best when there is lots of unused 4G spectrum, something generally not true at Verizon. 

Not surprisingly, some observers continue to believe Verizon will eventually have to augment its spectrum holdings. That might take the form of bidding to acquire priority access licenses in the upcoming Citizens Broadband Radio Service auctions, C-band spectrum or perhaps 40 MHz of Ligado spectrum at 1.5 GHz at some point. 

Should the T-Mobile US merger with Sprint fail, Dish Network spectrum might be an option, perhaps as a lease. Dish Network holds licenses for significant amounts of low-band and mid-band spectrum.

source: FCC, Cowen and Company

In principle, Verizon could also lease spectrum from Sprint, should the merger fail. We will have to see whether Verizon’s big bet on dense fiber networks supporting small cells and millimeter wave spectrum will work, without major new spectrum acquisitions. 

On historic grounds, Verizon’s strategy makes sense. Most of the capacity growth U.S. mobile operators have gained has been from using smaller cells. New spectrum has played a key, but less important, role. Better radios are a third way mobile operators have been able to increase capacity. 

source: Science Direct

Verizon has lots of new millimeter wave spectrum to work with. The issue is whether millimeter wave assets alone will do the job.

History Suggests Telcos Will Not Want to Build and Operate Private 5G and 4G Networks

Are private 5G or private 4G networks a big potential threat to public network revenue models?

Or, as enterprises gain the right to use spectrum to build their own private 4G and 5G premises networks, are there new roles for system integrators, including mobile operators, to build and operate such networks on behalf of customers?

And if so, how big a revenue opportunity might exist, and for whom?

Suppliers will have to explore the possibilities. So Ericsson and Capgemini have partnered to explore their opportunities in the private 4G and private 5G network area. 

Telia in Sweden os the first service provider to join Capgemini and Ericsson looking for commercial projects in the Scandinavian market. 

In terms of business models, Ericsson might hope to sell infrastructure and software. Capgemini might look to provide both consulting, implementation and operation. Telia might seek mostly to garner the access revenues. 

But even that partnership illustrates a historic pattern that might clarify the potential revenue upside and downside. Generally speaking, private networks have not historically been a threat to service provider revenue models.

In fact, connectivity providers generally have preferred not to be in the premises networks business, which is why the private branch exchange and interconnect businesses exist, why local area networks are run by enterprises and consumers without a direct connectivity provider role (beyond the WAN connection), and why Wi-Fi has not generally created a direct revenue opportunity for telcos.

Simply put, the revenue is too small and the profits virtually non-existent for telcos. So even an expanded new ability for enterprises to create their own private 5G and 4G networks does not necessarily represent a revenue threat for mobile operators. This is a business that historically has been too small to chase.

To be sure, an obvious potential business model might have a telco operating a private networks business, building, operating and maintaining private 4G or 5G networks on behalf of enterprise clients.

The analogy might be a telco building, operating and maintaining a local area network, a Wi-Fi network or a PBX platform for an enterprise customer. This has proven difficult, both for telcos and a few firms that have tried to build a business doing so. 

Boingo, arguably the largest third-party supplier of enterprise venue Wi-Fi and neutral host mobile access in the U.S. market, has total annual revenue in the range of $275 million. As significant as that might be for many firms, it indicates a total addressable market simply too small to support a tier-one telco effort. 

In fact, in recent years, Boingo revenue growth has shifted to supplying distributed antenna system access to venues for mobile service providers. Basically, Boingo supplied the indoor or premises radio network for mobile phone service. 

Another example is the business private branch exchange (enterprise telephony) business. Telcos historically have preferred not to operate in this segment of the business, as gross revenue and profit margins are close to non-existent. Instead, ecosystem partners including system integrators and interconnect firms have occupied this niche in the market. 

The enterprise PBX market has not been large enough, or profitable enough, for the typical telco to pursue. 

The big takeaway might be that private network markets are not large enough for most telcos to pursue. The costs of building and operating a Wi-Fi network, enterprise telephony or indoor mobile network are not prohibitive for enterprises. So the opportunity for managed services might not be so large for any would-be third party suppliers. 

source:" Netmanias

Most large enterprises ultimately find that the cost of using a managed service provider exceeds the cost of building and operating a private local network. At low volume, a managed service often is more affordable. Those advantages often disappear at volume, however. That is why many enterprises still find they save money by operating their own LANs and PBXes. 

The takeaway might be that private 4G and private 5G will ultimately not prove to be disruptive for mobile service providers, even if significant private network activity occurs. 

AT&T Promises Nationwide 5G in Second Quarter 2020

Low-band spectrum does matter, where it comes to coverage, no matter which mobile generation uses that spectrum. 

“Our 5G network covers 50 million people today and we expect to have nationwide 5G coverage in the second quarter,” says Randall Stephenson, AT&T CEO. 

Many early tests suggest that low-band 5G provides better access speeds than 4G, but not all that much, perhaps 20 percent in some cases. In principle, 5G speeds are expected to be higher or faster than 4G, but the precise degree of improvement depends on which 5G frequencies are used. 

Low band (600 MHz to 800 MHz) might be 20 percent faster than 4G. Mid-band 5G (2 GHz to 3.5 GHz) might be six times faster than 4G. Millimeter wave 5G (24 GHz, 28 GHz) might be an order of magnitude (10 times) faster than 4G. 

In principle, 4G can reach 100 Mbps, while 4G Category 4 can reach 150 Mbps and 4G using LTE Advanced can reach 1 Gbps. The 5G standard allows for speeds up to 10 Gbps, if enough millimeter wave spectrum is available, and the widest channels are used. 

So far, in South Korea, for example, customer experience on 5G might not be viewed as significantly different from 4G experience. 

Mid-band spectrum, on the other hand, has shown significant speed differences from 4G. To be sure, since wider channels supply much faster connections, channel size--in addition to frequency--explains why low-band 5G is not really different from 4G. 

Even if 5G channels can be quite a bit larger than 4G, as a practical matter, running 5G in the low band is subject to low-band channelization plans, which typically range from 10 MHz to 20 MHz, even if 5G can support channels of 500 MHz. 

Other techniques, such as dynamic spectrum sharing, allow 5G radios to operate in 4G bandwidth. But in such cases the 5G channels are limited to 4G limits. 

Spectral efficiency depends on several matters, including the type of radios used, the channel bandwidth, frequency and modulation techniques. Using the same radio modulation and radio types, 5G tends to be more bandwidth efficient than 4G. But the improvement is on the order of 20 percent when using low-band spectrum. Efficiency might approach 50 percent using mid-band frequencies. 

As there is a direct relationship between channel width and bandwidth or speed, so there is an inverse relationship between frequency and capacity. Lower frequencies simply are not as capable as mid-band or millimeter wave frequencies of supplying bandwidth and internet access speed. 

5G coverage is important, without question. But the eye-popping speeds possible with millimeter wave spectrum will not be possible when using low-band spectrum. 5G will be incrementally better than 4G when using low-band spectrum. But only incrementally and marginally better.

What Does 5G Mean for the Rest of the Ecosystem?

What might 5G mean for all those in the ecosystem aside from mobile service providers? What will change, and what possibly could happen in the rest of the ecosystem, ranging from chips to apps; use cases to business models? How does 5G bring those changes? Where is the upside and the downside?

Dean Bubley, Director, Disruptive Analysis, United Kingdom

John Ghirardelli, Director, U.S. Innovation, American Tower Corporation, USA 

Ramy Katrib, CEO & Founder, DigitalFilm Tree, USA

Yang Yang, Co-Director, and Professor, School of Information Science and Technology, SHIFT, and ShanghaiTech University, Peoples Republic of China 

Gary Kim, Consultant, IP Carrier, USA 

Are Cell Towers Dangerous to Your Health?

Cell tower radio emits energy 100 to 5,000 times lower than a TV transmitter; some liken the power level to that of a light bulb. 

The weight of evidence suggests that if radio-frequency emissions have any effect on humans at all, it is, according to the World Health Organization, about on par with other possibly carcinogenic items including coffee, mate tea,  glass containers, some pickled vegetables. 

A variety of studies have found "no health effects," according to WHO, with "No statistical significance" or "no evidence" of potential harm. 

Other studies show "no adverse health effects"or an "actual risk appears to be zero." And despite the concern that millimeter waves might be more dangerous, higher frequencies actually are safer.

One study, suggesting that mobile signals are "possibly carcinogenic" also classifies at the same level of risk products such as aloe vera, pickled vegetables and coffee.

In fact, to the extent you might ever be concerned, it is not the cell tower radios one needs to be concerned about. Those signal sources nearly always are so far away that logarithmic signal decay dramatically reduces power levels. 

The bigger issue, if you are concerned, is the mobile device itself, transmitting from a location next to your head. 

Compare the power levels of radio frequency signals from a variety of sources:

• natural electromagnetic fields (like those created by the sun): 200 V/m
• power mains (not close to power lines): 100 V/m
• power mains (close to power lines): 10,000 V/m
• electric trains and trams: 300 V/m
• TV and computer screens: 10 V/m
• TV and radio transmitters: 6 V/m
• mobile phone base stations: 6 V/m
• radars: 9 V/m
• microwave ovens: 14 V/m

Note the low levels of power from cell towers, compared to the other sources, less than the levels from a computer screen, for example.